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Elder Law Exam Solution

by Ira M. Leff, Esq.

February 2, 2010

Mary and David owned 50 acres of homeplace property in Blairsville (the names have all been changed). Mary entered Mountainside Nursing Home in 2007, and has been receiving Medicaid assistance since then. In December 2007, before Mary's application was approved, David executed a deed creating a joint tenancy with right of survivorship between himself, his daughter and grandson. Prior to this, the property was held as joint tenants with right of survivorship between David and Mary. In 2008, the family sold off a few lots in the middle of the acreage. As a result, Mary realized that she still owned half of property. Under a very simple power of attorney, Mary's daughter deeded Mary's interest to herself and her nephew.

David deeded the remainder interest in his half of the homeplace property to his daughter and grandson before Mary was approved for Medicaid. A transfer penalty should have been assessed against Mary. All transfers by the community spouse (C/S) during the look-back period, which includes the application period, affect the eligibility of the applicant/recipient (A/R). MEDICAID MANUAL § 2342-4. Moreover, while most transfers by the C/S after A/R's eligibility has been established do not affect the A/R, transfers of the homeplace and annuities do. MEDICAID MANUAL § 2342-2.

When Mary and David sold off a few lots in the middle of their homeplace property they sub-divided the property so that only the part with the house on it was still exempt as homeplace property. MEDICAID MANUAL § 2316-1. Since Mary owned half of the detached property, her Medicaid benefits should have been terminated by the sale. She had a duty to report this transaction to her DFCS caseworker.

Mary's daughter attempted to use the power of attorney that Mary gave her to transfer the remainder interest in Mary's half of the remaining property to herself and her nephew. The power of attorney did not explicitly allow gifting. Therefore, this attempt was null and void. Had the power of attorney allowed this gift, Mary would have been knocked off of Medicaid by the transfer. MEDICAID MANUAL § 2342-4. So, Mary still owns half of the homeplace and half of the detached property which will subject her Estate to Estate Recovery after she dies.

What should Mary and David have done? Mary should have transferred her share of the property to David while she was competent. There is no penalty on spousal transfers. MEDICAID MANUAL § 2342-2. His sale of the lots after Mary was on Medicaid would not have caused a problem since his assets don't count for Mary's eligibiltiy after approval. MEDICAID MANUAL § 2502-2. David's Will could have left all of his property to his children/grandchildren. If he predeceased Mary, the property would have passed to them upon his death. If he survived Mary, they would have been exempt from Estate Recovery since Mary's separate assets were worth less than $25,000. MEDICAID MANUAL § 2398-1.

In the next issue, I will discuss what can be done now to mitigate the damages.

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